BEIJING (Reuters) – China’s economy ended 2024 better than expected, helped by stimulus measures, although fears of a new trade war with the U.S. and weak domestic demand could dent confidence in a broader recovery this year.
For the full year 2024, the world’s second-largest economy grew 5.0%, meeting the government’s annual growth target of around 5%. Analysts had forecast 4.9% growth.
The economy grew 5.4% in the fourth quarter from a year earlier, beating analysts’ estimates by a large margin and the fastest growth since the second quarter of 2023.
Key points
* 2024 GDP +5.0% (compared to the planned 5%).
* Q4 GDP +5.4% y/y (f’cast +5.0%, Q3 +4.6%)
* Q4 GDP +1.6% q/qs/adj (f’cast 1.6%, Q3 +1.3% revised)
* Dec Industrial Production +6.2% y/y (f’cast +5.4%, Nov +5.4%)
* Dec retail sales +3.7% y/y (f’cast +3.5%, Nov +3.0%)
* Fear of more US trade tariffs will cloud the outlook for 2025
Market response:
China’s main Shanghai stock market rose 0.3%, while the blue-chip CSI 300 index rose 0.4% after the data was released. The yuan is little changed against the dollar.
Comment:
Elliott Clarke, Senior Economist, Westpac, Sydney
“Overall, these are expected results, and the foreign sector that’s driving them is expected. And to make sure they’re in a strong position to really deal with the uncertainty around U.S. tariffs and keep consumers out. Sticking with it, they need to do more on policy through February and March when we get Congress in session.”
“This year they will reduce interest rates a little bit and cut R three times to support liquidity. So everything will continue, but the force that drives the growth outlook should be the budget side.
They could see growth of around 5% by 2025. That’s assuming they take that proactive stance on policy and they’re in a good position to avoid what we’ve seen in business this year. “American Tariff.”
Gary Ng, Senior Economist, Natsys, Hong Kong
“The downside headwinds are more powerful than the headline GDP numbers. With stronger net export growth and more supportive stimulus, some positive progress towards stability is emerging in the economy.”
“However, without a rebound in industrial production and retail sales, domestic demand remains weak, particularly as the property sector continues to attract investment. China will need more interest rate cuts and more demand-side fiscal policies if it is to achieve growth above 4.5% in 2025.”
Lin Song, Chief Economist for Greater China, ING, based in Hong Kong
“After reaching the 2024 growth target, the key question for 2025 is where policymakers will set the growth target for the next two sessions in March. Our baseline is that policymakers have chosen to set a target again at or around 5%.” At least “more than 4.5%”.
“Despite significant pressure from tariffs and sanctions, setting such a target would support stronger fiscal policy and continued monetary policy and could be seen as a sign of confidence by markets.”
Alex Lu, Fx & Macro Strategist, TD Securities, Singapore
“Despite the recent stimulus debacle, we do not think the economy is on solid footing, and additional fiscal funds may be deployed in the budget on March 5 to ease China’s economy against Trump (administration) policies.
Next week, the focus will turn to Trump’s actions in China and the 60% tariffs on China that could prompt the PBOC to cut its 7-day contra to increase monetary easing activity next week.
“For 2025, we expect China’s GDP growth to be 4.8%, as a target of around 5% can be defined by the budget judgment of the local government’s GDP goals.”
Andy Gee, Asia FX and Rates Analyst, ITC Markets, Shanghai
“It’s a mostly mixed bag of economic data to end 2024, with some data discrepancies and a clear lack of momentum carried over into 2025. In particular, retail sales and investment growth slowed to a full-year pace, at 3.5% and 3.2%, respectively, of the overall domestic Production growth remained below 5 percent.
“With a shift in US trade policy looming, this year’s growth target will again be closely watched in March, although much less focus on the back of weak consumer spending has been given to the big miss on inflation to ‘around 3%’ in 2024.”
Ben Bennett, Asia-Pacific Investment Strategy, Legal and Comprehensive Investment Management, Hong Kong
“The data is a confirmation of the economic changes implemented by the authorities. The property sector is still under pressure and the authorities do not want to return to the old consumption and large price increases, so investors should still be patient.”
ZHIWEI ZHANG, Chief Economist, Pinpoint Asset Management, Hong Kong
“The macro data set shows mixed messages. While GDP growth surprised in Q4, I think the unemployment rate rose above 5%. The change in policy stance last September helped stabilize the economy in Q4, but it’s big and it will take a lot to boost economic growth and recovery.” To sustain sustained policy stimulus, fiscal policy must take a more proactive stance to curb rising unemployment.
ZHAOPENG XING, Senior China Strategist, Anz, Shanghai
“GDP surprised the market at a low rate of 5.4% y/y due to the low level and also the policy stimulus. IP is strong due to external front load demand, retail sales normalized to annual average levels.
“The strong numbers pave the way to the 5% 2025 growth target and give China an opportunity to assess the risk side of the economy. Both the recent liquidity crunch and the Vanke saga suggest that macro-prudence is weighing more heavily than the current policy agenda. We expect tariff shocks to subside, but rate cuts may be delayed.
Wai Chen Ho, UOB, Economist, Singapore
“It’s primarily driven by the industrial sector in December. Part of that is on forward shipments and exports before (US President-elect Donald) Trump returns to office.”
“This may not continue in the future, so the outlook for this year will still be weak. Retail sales are one of the most important things we have to watch now, because I think it’s a reflection of consumer sentiment. It’s still soft at this point.”
“This is a relief for Chinese assets, showing that the 2024 stimulus measures are having an impact. Chinese markets still face structural headwinds and tariff risks, and the response to those will be the ultimate driver of long-term returns. The hit is strongest on industrial production – perhaps from the new administration’s tariffs.” It may be due to front loading to the United States, weak retail sales will outweigh the impact of the stimulus.
“Positive signs, but we’ll have to see how stimulus and tariff concerns play out to keep momentum going.”
Background
* China’s economy has struggled to pull through as the post-pandemic recovery quickly fizzled, a prolonged asset crisis, weak demand and high local government debt levels weigh on activity.
*Policymakers have unveiled few stimulus measures since last September to stimulate demand growth as US President-elect Donald Trump, who proposed steep tariffs on Chinese goods, is set to return to the White House and vowed to do more this year. next week.
* Analysts say the scope and scale of China’s moves could depend on how quickly and strongly Trump implements tariffs or other punitive measures.
* China is expected to unveil growth targets and stimulus plans at its annual parliamentary session in March.
* The world’s second-largest economy could shrink to 4.5% in 2025 and 4.2% in 2026, according to a Reuters poll.
(Reporting by Reuters Asia Bureau: Compiled and edited by Subhanshu Sahu)
